About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

This is wishful thinking. How many college grads will benefit from the $5 increase in their (minimum) wages? If they do make minimum wage currently, they are still NOT going to be able to pay off their loans. Worst, some will lose their current minimum wage job and become another statistic in un(der)-employment.

Although I believe the $15/hr wage is needed to survive in high rent/mortgage Seattle; let’s be practical too. If the local employers have to pay it; they just reduce the services, portions and job hours too….

Eh it’s a mixed blessing for me. I own rentals in Seattle and expect to be able to raise rents if it happens. But I’ll probably personally do more business in Bellevue.

I wouldn’t assume it would be positive. Your existing tenant might lose their job to automation or a more qualified employee. Or their employer might simply cut their hours or shut down entirely. Two months of lost rent and an eviction expense could quickly wipe out any increase in rents, assuming those increases even happen.

But you do raise a good point. Assuming this change actually does help some people, that will possibly result in rising prices for some things. That will hurt people living on fixed incomes.

RE:Eastsider @ 4 – Yes indeed. Of course if you have a useful degree should you be making minimum wage? (Yes, in Koch Brothers’ Amerika.)

The talking heads on the Sunday shows were pooh poohing Elizabeth Warren’s proposal to allow the re-financing of student loans. Horrors! It would add to the deficit! Bleed ’em dry, by crackee! A kindler and gentler nation, afterall.

This is wishful thinking. How many college grads will benefit from the $5 increase in their (minimum) wages? If they do make minimum wage currently, they are still NOT going to be able to pay off their loans. Worst, some will lose their current minimum wage job and become another statistic in un(der)-employment.

studies show when the min. wage is raised almost all income levels show a bump.

Although I believe the $15/hr wage is needed to survive in high rent/mortgage Seattle; let’s be practical too. If the local employers have to pay it; they just reduce the services, portions and job hours too….

RE:pfft @ 9 – But none of those studies (even the Berkley one) involved a situation like this where one city goes it alone with an increase this high. It’s going to be hard enough to pass on the cost increase for the minimum wage workers, I think SEIU got totally ahead of itself in thinking that Safeway and other chains are going to let this be a reason for raising other wages as well or at least by anything of a comparable margin. Bagers and cart wranglers will just earn that much closer to what cashiers are getting, since driving out of the city limits will be too easy a get around if stores raises prices too much. It may help the dirt poor and the UW kids but for the middle class and lower-middle class who won’t see a pay increase to match their cost increases it is just going to squeeze them even more.

If you have lower end rentals though it might be a good thing. Landlords will certainly try to capture a large chunk of the wage gains as people bid up the limited housing stock even further. More likely though the recipients will still live outside the city and spend most of their new found wages near their homes at businesses that aren’t the ones bearing the increased costs. Which will lead to less jobs in the city and fewer residents of the city that aren’t high paid professionals. On the plus side those professionals will probably be happy to still overpay to buy your former rental.

This is wishful thinking. How many college grads will benefit from the $5 increase in their (minimum) wages? If they do make minimum wage currently, they are still NOT going to be able to pay off their loans. Worst, some will lose their current minimum wage job and become another statistic in un(der)-employment.

studies show when the min. wage is raised almost all income levels show a bump.

My son, who’s who’s in college and working in Seattle is very concerned that a $15 min wage will impact the amount of hours he currently receives. He does not expect his take home pay to increase…but he’s afraid his rent will.

Seriously, there is no current study to support your claim. If true, why stop at $15? How about $50!

Most likely Seattle will be the future case study to NOT go down the path singularly!

This feel-good policy is likely to drive low-wage businesses and people out of the city. The low-margin businesses serving the poor will simply disappear just like the bookstores. And Seattle will end up with expensive Starbucks and Whole Foods stores. The people on minimum wage will still not be able to afford living in the city when everything costs more.

Seriously, there is no current study to support your claim. If true, why stop at $15? How about $50!

Most likely Seattle will be the future case study to NOT go down the path singularly!

This feel-good policy is likely to drive low-wage businesses and people out of the city. The low-margin businesses serving the poor will simply disappear just like the bookstores. And Seattle will end up with expensive Starbucks and Whole Foods stores. The people on minimum wage will still not be able to afford living in the city when everything costs more.

“This feel-good policy”

that’s ridiculous. this is a great policy that will help people at the lower rung of society. they’ll better be able to survive.

“Seriously, there is no current study to support your claim. If true, why stop at $15? How about $50!”

eventually it will have some effect but studies show it won’t be $15 dollar an hour.

“is likely to drive low-wage businesses and people out of the city.”

says who? you got a study?

“The people on minimum wage will still not be able to afford living in the city when everything costs more”

prices will go up a negligible amount. most will not notice. we’re talking about something that costs a dollar will now cost maybe $1.03.

have you ever gotten a raise? did you turn it down? will you turn down future raises because it will cause someone to lose their job and drive people out of the city? didn’t think so.

people making more money is good for business not bad. think about it.

The horror about student loans is that they can’t be discharged in the bankruptcy court. The law should be changed so that we get some disciplines on the lending side. Unfortunately, Blurtman, the interest rate on student loans will have to go up to compensate for default risks or the ability to obtain a loan will be limited to a few marketable majors. I wish we could go back in time to the sixties when everyone could afford college without any loan!

RE:Eastsider @ 21 – For a real sense of schadenfreude read student loan blogs. Folks who feel as if their lives have been ruined. No job, or lousy part time job, and significant student loan burden. No future. And folks who are retired having their SS garnisheed.

And certainly student loan reform is long overdue. Schools, especially the for profits, should be honest with their dupes, I mean students, with regards to placement rates and starting salaries.

But as we have seen, one can be insolvent, and yet gain access to credit, and even be bailed out by the US government. Unlimited backstop for some, but not for others. And certainly the Fed can buy toxic securitized student loans, and disappear them, can’t it? Or is that privilege only available for those of a certain class?

If the bagger’s wage raises to almost that of a cashier, won’t the cashier want more? He might as well be a bagger if they are getting paid the same. Won’t all wages have to go up to compensate for the disparity in job responsibility and pay?

Those (currently 47%) who find Seattle less appealing because disfavored working people might be paid even a marginal living can ease their pain by moving out of Seattle. Wyoming’s lowest in the US minimum wage means that it must be a hotbed of jobs and businesses, and would be a dynamite destination. This will free up many Seattle domiciles helping to create enhanced affordability here.

Yes, I have read many sob stories and feel sorry for these people. The government basically enslaves them, in my opinion, when it makes loans freely available to 17- and 18- year old kids. Drop the government guarantee of student loans and allow the loans to be discharged in the bankruptcy court will stop such financial slaveries. The risk is fewer students will be able to afford college at current tuitions.

The policymakers should focus their energy to contain the cost of college so everyone can attend college without any loan, just as in the sixties. Offering cheap loans, as you can see, is not making college any more affordable today for many students.

If the bagger’s wage raises to almost that of a cashier, won’t the cashier want more? He might as well be a bagger if they are getting paid the same. Won’t all wages have to go up to compensate for the disparity in job responsibility and pay?

yes. isn’t that good? haven’t people been complaning that wages haven’t increased in awhile and that there have been too many low wage jobs created? problem fixed.

RE:pfft the wise @ 20 –
Earlier in your post you say “says who? you got a study?”, then you follow up with…
“prices will go up a negligible amount. most will not notice. we’re talking about something that costs a dollar will now cost maybe $1.03.”

Way to go pulling numbers out of your ***** right after criticizing someone else for posting unsupported evidence.

In regards to the comment about something costing 1$ turning into 1.03 if the min wage goes to $15, here’s how I break it down. Most service industry businesses (such as food) spend about 30% of revenue on labor costs. Currently minimum wage is around $9, so if that goes to $15 that represents a 67% increase in labor costs. That 30% of revenue multiplied by 1.67 now becomes 50.1%. That means that there’s going to be somewhere around a 20% increase in the cost of that item with this rule going into effect.

Granted, some of those increased costs will be eaten by the business in the form of lower profits, but not all. You’ll be paying much more than 1.03

RE:pfft the wise @ 20 –
Earlier in your post you say “says who? you got a study?”, then you follow up with…
“prices will go up a negligible amount. most will not notice. we’re talking about something that costs a dollar will now cost maybe $1.03.”

Way to go pulling numbers out of your ***** right after criticizing someone else for posting unsupported evidence.

In regards to the comment about something costing 1$ turning into 1.03 if the min wage goes to $15, here’s how I break it down. Most service industry businesses (such as food) spend about 30% of revenue on labor costs. Currently minimum wage is around $9, so if that goes to $15 that represents a 67% increase in labor costs. That 30% of revenue multiplied by 1.67 now becomes 50.1%. That means that there’s going to be somewhere around a 20% increase in the cost of that item with this rule going into effect.

Granted, some of those increased costs will be eaten by the business in the form of lower profits, but not all. You’ll be paying much more than 1.03

the number I quoted is from the article that I posted…twice. restaurant costs might go up more than that but you have to also remember that just about everyone gets a raise. how can a business be hurt if everyone gets a raise? they have more money to spend.

next time you get a raise just turn it down and say you don’t want to cause unemployment and inflation to go up.

It’s quite amazing how little faith people have in the economy. QE will lead to hyperinflation. Same with bank bailouts. The stimulus did nothing but raise commodity prices and was counterproductive. right. Obamacare will ruin the economy and the healthcare system. and on and on.

If the bagger’s wage raises to almost that of a cashier, won’t the cashier want more? He might as well be a bagger if they are getting paid the same. Won’t all wages have to go up to compensate for the disparity in job responsibility and pay?

As long as a cashier is still making at least something more than a bagger, even if it’s only $1/hr, there is incentive to take the “higher responsibility” job of cashier. Other near-minimum-wage jobs might need to go up a little, but I’m sure that the wage scale disparities can take some compression from where they currently are (i.e. if a bagger is making $9 and a cashier is making $16 currently, if the bagger’s wage goes up by $6 the cashier’s won’t need to go up by the same $6 to make it still worth it to take on the added responsibility of cashiering).

RE:Christian Wane @ 29 –
Oh and don’t forget that if they buy any services from another company in Seattle then those folks also saw a 50% wage increase that they need to pass along.

I don’t expect a catastrophic event due to wage increase. I do know from business owners I’ve talked to and service staff I’m close with that they are very afraid that tipping will decrease due to a higher minimum wage. If tipping is dropped then the servers fear a 50% reduction in income even after a raised wage. I personally think tipping will decrease but not substantially.

Wages should be indexed to inflation in my opinion but increases beyond that require productivity gains.

I’d also say minimum wage wasn’t intended to be high enough to raise a family. It was a starter wage which you were expected to earn your way out of. It certainly shouldn’t be the wage that let’s you live wherever you want in the manner you’d like just for being alive. Seattle is expensive. You can live outside it for much cheaper. Do you want to live where it’s hip or where you can have cash to do what you’d like? At a minimum wage you have to pick one.

RE:Eastsider @ 18 – Absolutely. Despite the Populist appeal of a minimum wage increase, as long as it’s confined to the city proper it’s only going to increase income disparity and lead to more bifurcated markets, especially in housing.

If you look at the economies of the highest income counties in the US, the typical structure is high paid white collar work, and all of the other people that do service work for them. 15NOW is a bold step in this direction.

RE:pfft the wise @ 20 –
Earlier in your post you say “says who? you got a study?”, then you follow up with…
“prices will go up a negligible amount. most will not notice. we’re talking about something that costs a dollar will now cost maybe $1.03.”

Way to go pulling numbers out of your ***** right after criticizing someone else for posting unsupported evidence.

In regards to the comment about something costing 1$ turning into 1.03 if the min wage goes to $15, here’s how I break it down. Most service industry businesses (such as food) spend about 30% of revenue on labor costs. Currently minimum wage is around $9, so if that goes to $15 that represents a 67% increase in labor costs. That 30% of revenue multiplied by 1.67 now becomes 50.1%. That means that there’s going to be somewhere around a 20% increase in the cost of that item with this rule going into effect.

Granted, some of those increased costs will be eaten by the business in the form of lower profits, but not all. You’ll be paying much more than 1.03

the number I quoted is from the article that I posted…twice. restaurant costs might go up more than that but you have to also remember that just about everyone gets a raise. how can a business be hurt if everyone gets a raise? they have more money to spend.

next time you get a raise just turn it down and say you don’t want to cause unemployment and inflation to go up.

There’s a big difference between me getting a raise and the forced increase in minimum wages that you’re turning a blind eye to.

A raise to me would be due to market forces of low supply of my skilled labor and high enough demand that they have to pay me more or I will go somewhere else; those to factors have to be present in addition to it being necessary that my labor must be worth more to a company than the wages they would be raising my salary to.

In the event of the minimum wage being increased, there are many low wage jobs where the value of that employee to the firm is not much more than they’re being paid. For example, I work in the call center industry, there’s a dollar value where humans can be replaced by machines and it makes business sense. Lets say for example, a business knows that if labor cost is less than 10$/hr it makes more sense to hire people and if the cost is greater than that it makes more sense to build machines to perform those tasks. If minimum wage now goes to 15$ per hour you can sure as hell bet that the business is going to shift towards increased automation and reduce staff. Goodbye low skill jobs! Hello bigger gap between the haves and the have nots.

Here’s a real world example of how I witnessed many low skill jobs disappear. A big customer of ours hires up to 500 call center agents per month. The recruiting process is very labor intensive and low skill. The first round of the recruiting process consists of a team of people who calls each of the potential applicants to find out whether they can speak clearly enough; those who don’t make the cut do not move onto the next round of the recruiting process. The market wages for this low skill position have been pushed upwards to a point where they are now more expensive than machines, so what we’re doing is having job applicants call a toll free number and talk to a speech recognition machine who scores their speech clarity and pronunciation. Applicants who pass the speech rec exam now move onto the next round of recruiting. Goodbye human labor.

Oh and don’t forget that if they buy any services from another company in Seattle then those folks also saw a 50% wage increase that they need to pass along.

Two things wrong here. First, your 50% wage increase meme requires that all other companies in Seattle from which one could buy services have a fully minimum wage workforce.

Second is the idea that they “need to pass along” any increase in costs. Margins are not some kind of constant, as Boeing demonstrated while cutting wage costs in the face of increased income. Businesses charge as much as they dare for product, while paying as little as they can for expenses. That’s business 101. It’s only an issue if expenses leave a negative return, or a return so low that capital could be recovered and redeployed elsewhere for a better return.

It certainly shouldn’t be the wage that let’s you live wherever you want in the manner you’d like just for being alive.

Wow, If $15/hr will let you do that…. And just for being alive too. It’s like “those people” don’t even work (apparently). No wonder so many people envy them.

If the bagger’s wage raises to almost that of a cashier, won’t the cashier want more? He might as well be a bagger if they are getting paid the same. Won’t all wages have to go up to compensate for the disparity in job responsibility and pay?

As long as a cashier is still making at least something more than a bagger, even if it’s only $1/hr, there is incentive to take the “higher responsibility” job of cashier. Other near-minimum-wage jobs might need to go up a little, but I’m sure that the wage scale disparities can take some compression from where they currently are (i.e. if a bagger is making $9 and a cashier is making $16 currently, if the bagger’s wage goes up by $6 the cashier’s won’t need to go up by the same $6 to make it still worth it to take on the added responsibility of cashiering).

Also factor in all the other raised costs. The person who stocks the shelves will need to get a raise. The truck driver will need to get a raise. The person attending the service station will need to get a raise. The mechanic who works on the truck will need to get a raise. The plant where the lunch meat is sliced and packed will need to get a raise. The processing house where the meat is processed will need to get a raise. The rancher who is selling the cow (or crops) is seeing his costs go up (see the service station attendent and the mechanic, plus trucking costs) so he will need to sell his product for a higher price. Yeah, we should raise the minimum wage … NOT!

Just because the Boeing Machinist $12/hr starting wage goes to $15/hr doesn’t mean MSFT won’t move all the jobs to Canada to get more foreign replacements at cheap labor wages…..or Boeing won’t be moving all the commercial engineers to California soon.Your chart makes it clear the lower tiers get like 1000% of the wage increase the $30-70K would get almost none of the theoretical similar % increase.

And lately, unsucessfully too. Look at the SPEEA union in Boeing, gave up their retirement for a mostly 0% 401K joke….or you can roll the dice in the NWO stock market sell/buy timing that even Warren Buffet can’t get right either.

If the bagger’s wage raises to almost that of a cashier, won’t the cashier want more? He might as well be a bagger if they are getting paid the same. Won’t all wages have to go up to compensate for the disparity in job responsibility and pay?

As long as a cashier is still making at least something more than a bagger, even if it’s only $1/hr, there is incentive to take the “higher responsibility” job of cashier. Other near-minimum-wage jobs might need to go up a little, but I’m sure that the wage scale disparities can take some compression from where they currently are (i.e. if a bagger is making $9 and a cashier is making $16 currently, if the bagger’s wage goes up by $6 the cashier’s won’t need to go up by the same $6 to make it still worth it to take on the added responsibility of cashiering).

Let’s assume cashiers and baggers are currently both making under $15 an hour on their union contracts. I am not sure federal law would allow the company to pay the bagger $15 and the cashier anything more than $15. I seem to recall paying more than the contract wage, unless mandated by law, might be an unfair labor practice (or more specifically that is was in the late 70s, early 80s).

It will be interesting to see how this affects city sales tax and B&O tax revenue. If Seattle gets to be known as the city with higher prices, people may avoid shopping there.

RE:Eastsider @ 18 – Absolutely. Despite the Populist appeal of a minimum wage increase, as long as it’s confined to the city proper it’s only going to increase income disparity

says who? most studies show the biggest raise is among those working minimum wage. I don’t get the logic that raising someone’s income actually lowers their income. it’s not possible. other income groups gain but not as much.

I have a close friend who owns a small business employing ~10 medium-skilled workers. He cannot afford to pay them all $15/hr and still keep the business running. Therefore he is moving the entire company north to get out of Seattle city limits. They will be completely moved within a month. I fear the hollowing-out of Seattle as a result of this law.

RE:joedirt @ 45 – We’ve had minimum wage laws for decades. That’s not the issue. The issue is setting the minimum wage absurdly high due to some ignorant belief that you’re going to end poverty rather than increase it.

Some people will benefit, but very few of those will be the target group.

Disagree. If you accept the principle that one does not have the right to offer money for a task to be done, unless it is a rate of pay subject to voter approval, then the logical consequence is what you are seeing now.

There really is no reason to waste time arguing the details of studies. Each side can line up expert analysis from think tanks and such, but the voters will just go with the better ad campaign in the end.

RE:Eastsider @ 18 – Absolutely. Despite the Populist appeal of a minimum wage increase, as long as it’s confined to the city proper it’s only going to increase income disparity

says who? most studies show the biggest raise is among those working minimum wage. I don’t get the logic that raising someone’s income actually lowers their income. it’s not possible. other income groups gain but not as much.

How exactly will an increase in the minimum wage increase the income of non-wage earners? It’s not going to do a whole lot to bump up SSI/SSDI checks, and those people will be paying slightly more for necessities like rent.

I agree, wage earners in general will be better off, but the workforce participation rate is less than 2/3’s of working age adults.

I have a close friend who owns a small business employing ~10 medium-skilled workers. He cannot afford to pay them all $15/hr and still keep the business running. Therefore he is moving the entire company north to get out of Seattle city limits. They will be completely moved within a month. I fear the hollowing-out of Seattle as a result of this law.

Low pay for medium skills goes to community that wants low wage jobs, and Seattle gets some relief on the outsized demand for commercial real estate. Seems like everyone wins.

To paraphrase another poster, Seattle is expensive. You can do business outside it for much cheaper. Do you want to operate a business where it’s hip or where you can have cash to do what you’d like? As a minimum wage employer you have to pick one.

More appealing. If Seattle residents can afford to spend $250 a square foot to live in a little wooden box, they can afford to spend a few more dollars on food at whatever trendy local fedora wearing hipster vegan taco joint they choose to eat at in the middle of the day while everyone else is at work.

RE:whatsmyname @ 36 – Regarding the simplistic “passing on of costs” argument, most who make it are ignorant of the concept of price elasticity of demand: all the increased costs will only be passed on for completely inelastic goods/services.

In the real world, nothing is completely elastic or inelastic; things fall somewhere on the scale in between the two absolute extremes. Given where their goods/services fall on the scale, businesses will choose to eat a greater or lesser fraction of their costs, because if they didn’t choose to eat some of the cost, their profits would go down more due to lowered sales volume than they would due to accepting a lower profit margin per sale.

In other words it WILL be inflationary to some degree but not all the cost will just be passed on; it WILL also redistribute income.

pfft – I already failed to pay close enough attention and let you violate the post limit by changing your name once. It’s not going to happen again. If you want to keep arguing endlessly with everyone about the minimum wage, take it to the open thread.

The three comments you attempted to post under the name “pfft the wise and generous” have been trashed, per the comment policy.

RE:ChristianW @ 51 –
I wanted to ask you from a previous thread how you found a condo to remodel in Capitol Hill? I look all over all of the time and I see nothing. I look up to 400k and see nothing ever. Is there a secret?

We will be neighbors anyway because I am renting there next month. I would love to buy though. Maybe I am late to the party?

RE:Erik @ 57 – Erik, You missed your chance to fix up this place and flip it. Somebody bought it for $363,700, and are fixing it up quite nicely. If they allow you into Sammamish, you should check it out. Even better, developers are clearing out dead trees across the street and putting in a few houses. Best of all, they are going to fix up the terrible potholed private road. The area will look even better, and there will be nice new houses across the street. I think the fixer will go for $650,000.

RE:Blurtman @ 58 – I certainly hope a shabby place like that gets torn down. 1.27 acres? That place would be a scraper on a 5000 sq ft lot in North Seattle. If that were in a SF5000 zoned hood on the west side of the lake, land alone would be in the millions.

RE:Blurtman @ 58 –
Hahaha… If they allow me into. They will stop me and say “Hey!, aren’t you that trash bag from North Everett?” “Yes” “Well we don’t want your kind!”

I dream of the day I get to drink PBR and remodel a house in Sammamish. Members of the association will be complaining about me, but it will be too late, I already own real estate there.

I passed up your remodels before because couldn’t get financing. I know I can get financing in a couple weeks for atleast $400k. Shoot me one in about 3 weeks and I could seriously buy it. You posted this one before. I think this would be a great candidate for a remodel.

mike- Why would you ever tear this gem down? I don’t think it is in that rough of shape. $40k remodel and then flip it to a programmer for $620k. That’s a quick $150k profit.

Erik, you know as well as I do that finding the “right” place is like finding a needle in a haystack. No special secrets, I was just actively searching for a few months and purchased with cash and no contingencies which got me the deal at $15k lower than the next best offer. The place I bought got 6 offers within 5 days of being on the market.

Last post for me in this thread. If you or anyone else wants to get a beer let me know.

“In regards to the price of commodities, the rise of wages operates as simple interest does, the rise of profit operates like compound interest. Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

RE:ChristianW @ 61 –
I would buy you a beer in Capitol Hill sometime for sure. I would like to hear your story since we are taking a similar approach. I am a little leary of leaving my contact information on here because there are a lot of psychos on here that are very angry with me. I could see many of them calling and leaving death threats, and I don’t need that drama.

A memo was recently released by the Clinton library showing the Clinton administration helped defeat indexing of the minimum wage. One reason mentioned: if passed it would take away the political weapon of attacking Republicans at election time. IE the minimum wage is just vote buying.

I certainly understand the thinking for increasing the minimum wage for workers. However, I do not hear of anyone or group who is considering those that have worked all their life, retired (many forced into retirement by corporate cut backs). Most are receiving less than the proposed minimum wage from Social Security. How are those folks to survive and live?